Can You Contribute More to Your 401(k)?
Have you thought about your retirement plan contributions lately? If your contribution is automatically deducted from your paycheck, you might not think about it too often. But periodically revisiting the amount you’re contributing can be a smart move.
When to Review Your 401(k) Contribution Amount
Consider reviewing your contribution amount under the following circumstances.
Beginning of the Year
When the calendar turns to the new year, even a 1% increase in your 401(k) contributions can have an impactful difference on your savings due to compound interest and more time in the market.
Your Annual Financial Review
Your annual financial review or beginning of the year planning should include a look at your retirement accounts. If your finances have taken a turn for the better, you may be able to increase your contributions. For example, paying off your car or other loan might leave you with extra money each month that you could invest for retirement.
You Receive a Raise or Promotion
Earmarking at least a portion of any raise or bonus you receive can be a painless way to increase your plan contribution. You’ve already been living without that money, so you probably won’t miss the amount you contribute to your retirement savings.
Or, say you get a big promotion — and so does your salary. It’s a good time to consider contributing the maximum amount to your employer’s 401(k) plan. For 2024, you can contribute up to $23,000. The 2024 catch-up contribution limit is $7,500, which you can apply if you’re age 50 or older. (Other plan limits may apply.)
No matter what your current financial situation, try to contribute at least as much as your employer will match to your retirement account.